Let’s recap the month of November in Calgary’s Real Estate market and use the data to make some reasonable predictions to price movements.

Price movements are grounded on the fundamentals of supply and demand. Real Estate also includes a dash of emotion when the market agrees on price ;-).

Demand for detached homes has increased, as the use of a home has changed from a residence into everything (kids school, home office, jail ;-) etc).

Other demand related forces being applied in Calgary’s Real Estate market are record low Mortgage borrowing rates, government income subsidies, increasing property values and in-flows of money from out of province.

One thing is for sure, today’s era of credit expansion is fueling asset value inflation at a rate not seen in this country – ever. Is there still “good value” in Calgary? I think so, with a healthy dose of perspective.

Then there is housing supply …we’ll go through the data below. Really quickly, there is less supply leading into Spring 2022 than there was leading into Spring 2021. Buyer demand seems to be insatiable at the moment so another price lift is in the forecast.

Let’s look at Calgary Real Estate Board stats.

Detached Homes:

Sales To New Listings Ratio:

A increasing ratio indicates less future inventory for sale. We can see below, the rise of this ratio in 2020 was an indicator of the 2021 spring market rush (post from December 2020 link). Today, the supply of Calgary detached homes is even tighter (less homes for sale).

Here’s why:

New listings added:

• November 2020: 893
• November 2021: 1,052

Inventory:

• November 2020: 2,244
• November 2021: 1,562

Sales:

• November 2020: 883
• November 2021: 1,246

I started waiving the “Spring market insanity flag” a couple months back (link). My shoulder is tired, but I’m still waiving it :-).

Absorption Rate:

Absorption rate answers this question …how many months would it take to liquidate ALL of Calgary’s detached housing inventory, at the current pace of home sales? Historically, absorption rates between 2-4 months are balanced.

(how many buyers want to go back to 2019 when offers were routinely coming in below list price, buyers had time for multiple showings, and competing offers were virtually unheard of)

We can see Calgary’s detached absorption rate is hovering just above 1 month. This gives the seller leverage in negotiations, often allowing them to review multiple offers and select the best one for them.

Unless there is a massive increase to listing supply, or some market force to ease home buyer demand, Calgary detached home values are poised to rise.

At this point, I think many of us have close friends or family who have experienced the realities of our housing market (one day home sales, competing offers, over list sales, losing on home bids etc etc). What do you think?

Average Price:

We can see 2021 prices ebb and flow seasonally, with 2021 at elevated levels. It’s possible a big trend divergence could be upon us for the months of November and December …let’s see how December sales data plays out.

Honestly, the Spring market in Calgary could already be happening?

Apartment Data:

Sales To New Listings Ratio:

We can see this ratio trend steadily with higher highs and higher lows throughout this year. Seasonally, heading into the winter yields higher sales to new listings data, but his year is even more positive.

I am sure many condo owners are elated to see less supply of condo apartments. For many years, over supply of apartment condos dogged this market segment. The tables are definitely turning now!

Absorption Rate:

Calgary’s apartment absorption rate is trending down into “balanced” territory for the first time in 5+ years. For this time of the calendar year, we are well below previous years levels.

I’ve seen news articles (link) about investors seeking to purchase Calgary apartment condos …and I’m seeing this personally in my business. There is A LOT of money in the system right now, and Real Estate seems to be a popular target of where to place capital. I think more and more investors are targeting Calgary as a source of capital investment, viewing our market as “under value”.

Median Price:

Median price has seemingly bottomed and is on the rise! The above indicators are supportive of increasing prices over the next couple of months.

Conclusion:

Era’s of credit expansion or contraction typically lead expansion or contraction of Canadian Real Estate markets. We’ve seen an incredible credit expansion through the pandemic which has had a big influence on today’s Real Estate market.

We all know rate hikes and continued credit constriction is on the horizon in Canada and the U.S. This typically provides the market with reason for parabolic price increases to level off. But will they? I think Calgary is uniquely positioned in Canada’s Real Estate market as our home values are still better valued (price to income ratios relative to other parts of Canada) and our oil and gas sector seems to be on stable footing.

I’m not forgetting how Calgary Real Estate can cycle, quickly. I have the tendency to think whatever part of the cycle I am in (appreciation or depreciation), becomes my new normal and the way things will alway be. I wish Real Estate was that linear.

I hope this is helpful for you. If you know of people who are planning to purchase, sell, refinance or renew their Mortgage send them this article, and put them in touch with me. Much appreciated.

Talk soon,
Chad Moore